Singapore, March 27 (ANI): Last week, a report released by Bloomberg Media Studios in association with DBS, the largest bank in Southeast Asia, revealed that while 85 percent of medians and 75 percent of small businesses say ESG (environmental, social and governance) is a high priority, only 37 percent have a clear roadmap on how to achieve their goals.
The report, published in the form of an e-book and titled “Catalyst for Sustainability”, was the result of a survey carried out in August last year involving 800 SMEs (small and medium-sized enterprises) in six markets in Asia, namely , India and China. , Taiwan, Hong Kong, Indonesia and Singapore.
The study involved more than 937 decision makers in industries covering real estate, mobility, energy, agriculture, and F&B/Hospitality. In-depth interviews with 11 SME decision makers were also conducted to better understand the barriers and opportunities around sustainability.
SMEs have an important role to play in tackling climate change. According to the World Bank, SMEs account for 90% of businesses and more than half of employment worldwide; however, many lack access to finance, technology, and expertise to embrace sustainability.
The report found that, overall, business leaders have positive attitudes towards sustainability with more than eight in ten agreeing, among other things, that their company’s operations should be geared towards protecting the environment and should incorporate values of sustainability when selecting investment projects.
“Being ethical is the most important thing,” a leader of a food and beverage company in Taiwan said in the report. “Basically you do what is morally right as a business.”
On average, Asian companies that considered ESG a high priority allocated 18 percent of their budget to ESG projects. They expect the allocation to reach 19.8 percent in the next three years, with most of it going to environmental projects.
Decision makers in the study cited the environment as having the biggest impact on their industries, with waste management, climate change and carbon footprint being key focus areas.
While complying with regulations, attracting talent, increasing revenue, pleasing stakeholders, and simply doing the right thing were the top motivators for SMEs to embrace ESG, respondents say unclear reporting standards and financial concerns are the biggest drivers. Common barriers to ESG adoption.
More than a third of SMEs noted challenges related to return on investment, cost of implementation, and meeting growth targets. The lack of clarity in ESG standards presented another challenge.
“It’s very difficult for us to find the right criteria to measure our ESG performance,” said a leader of a logistics and supply chain company in India. “Currently, we base our progress on energy savings compared to last year to see how well we’ve done.”
The report found that most SMEs are serious about ESG and plan to make it an integral part of their business, but many are still in the early stages of their journey. Some 83 percent of small businesses and 92 percent of midsize businesses have a strategy in place or are creating one, but only 37 percent have a clear roadmap for how to achieve their goals.
Most of the SMEs prioritized initiatives that could improve their results and those that can be implemented immediately. Currently, they are focusing more on identifying the sustainability issues that are impacting their businesses rather than formulating ESG frameworks and long-term strategies that would take years to achieve.
“We have our long-term mission, but no strategies,” said the head of a Chinese real estate and construction company. “We simply don’t have the resources to research and plan ESG initiatives for the next ten years.”
While long-term planning can be difficult, Yulanda Chung, Director of Sustainability at Institutional Banking Group, DBS, suggests practical steps: “SMEs can start by identifying material ESG items to focus on and then assess whether these items could be improved.” their final results.”
“Analyzing industry trends and best practices is another important step to take early on.” Chung adds. “SMEs can use the learnings to conduct risk analysis and understand the consequences if they don’t align with industry standards and government guidelines. These exercises can also help them identify opportunities and start planning a course of action. Over time, they can turn this into a quantifiable, actionable, time-bound roadmap.”
Reporting requirements can make the ESG journey difficult for SMEs. SMEs do not have the same resources as large corporations to embark on ESG reporting. The lack of a homogeneous framework or standardized guidelines also leads to large inconsistencies in the measurement of success and performance.
Respondents to the survey also said that companies expect banks to provide general ESG consulting first and foremost, followed by financial assistance and then thought leadership. Many companies, particularly SMEs, are unsure if their ESG initiatives qualify for green financing.
One company that has benefited from consulting with financial institutions regarding their ESG plans is Gurgaon-based ReNew Power. ReNew is one of the largest Independent Power Producers (IPPs) in India with almost 1,700 employees with an annual turnover of INR 69.1 billion (USD 912 million). It produces renewable energy through wind, solar and hydroelectric power.
To meet the challenge of the intermittency of power generated from renewable sources, it had sought financing to build the largest renewable energy project in India. The 1,300 MW 24-hour battery (RTC) project consists of three wind farms and a solar plus battery storage park with a storage capacity of 100 MWh in three states. Together they will provide 400 MW of electricity to SECI (Solar Energy Corporation of India).
Initially, ReNew found it difficult to obtain debt as the business is not traditional and therefore does not offer lenders the high degree of certainty in debt service that other industries do. However, he eventually managed to secure a billion dollars through a consortium of lenders that included DBS.
“When it comes to SMEs, we understand the many challenges they face in transitioning to more sustainable business models. But as they are the lifeblood of economies, it is imperative that SMEs make the transition successfully,” said Piyush Gupta, Director dbs executive.
